An interim budget is presented by the ruling government as their term is ending. The ruling government needs to be cautious about the proposed amendments to avoid criticism from the opposition and in matching the expectations of voters.
One such interim budget will be presented on the 1 February 2019. Everyone is waiting with bated breaths to see what the government will propose. Here are some of our expectations from the Budget 2019.
1. Raise on the Section 80C limit
The limit of Rs.1.5 lacs was last revised in Budget 2014-15. Now is likely a good time to update this limit given the current financial situation in our country. The Confederation of Indian Industries (CII) has also proposed an increase in the 80C limit to Rs 2.50 Lacs to the government.
2. Increase in the income tax slabs
It is likely that the government will agree to CII request to increase the Income Tax Slab limits. CII has suggested doubling the basic income tax exemption limit to 5 lacs from the current 2.5 lacs.
CII has proposed that income below 5 lacs should be exempt while between ₹5-10 lacs should be taxed at a lower rate of 10%. For those individuals having income between ₹10-20 lacs, the tax rate should be 20%, and those earning over ₹20 lakh should be taxed at 25%.
We also hope to see a reduction in the corporate tax rate to 25% irrespective of the turnover.
3. New NPS rules to be effective after the Budget 2019
The government has recently approved the increment in the share of NPS contribution from 10% to 14% for the central government employees. In addition, the withdrawal of NPS will be 60% tax-free from the present 40%. The remaining 40% though must be mandatorily put into an annuity.
We can anticipate that these provisions will include all taxpayers. The fine print of the Finance Bill 2019 will help clarify the conditions for eligibility under section 80C for investments made to the TIER 2 account.
4. Clarity on the Long-Term Capital Gains (LTCG) on equity investment
Currently, any switch within the same scheme from debt to equity in ULIPs and NPS or any fund reallocation between them is not liable to taxation.
However, in the case of a shift from a dividend option to a growth option or vice – versa, capital gains tax will be applicable. We expect that the government will bring parity between the schemes and make these tax savings avenues more attractive.